Banking and Financial News DT. 27.09.2017

IDBI Bank launches ‘Project Nishchay’ for turnaround (BL, BS 27.09.17)

IDBI Bank said it has launched ‘Project Nishchay’ in partnership with The Boston Consulting Group (BCG) to accelerate its turnaround programme and improve financial performance. The project will be led by senior management at IDBI Bank along with BCG, the public sector bank said in a statement. IDBI Bank MD and CEO Mahesh Kumar Jain said “BCG will assist us to identify areas for cost containment and revenue maximization leading to sustainable growth and profitability of the Bank. “With the support from our consulting partner, we hope to identify and address existing gaps, capitalize on core strengths and improve existing products and processes.” Coordinating across multitude of initiatives, the Bank will focus on four key areas - revenue enhancement, cost control and reduction, asset productivity and overall program management in consultation with BCG.

Karnataka Bank’s Aadhaar centre (BL 27.09.17)

Karnataka Bank opened its first Aadhaar enrolment and updation centre at the Sanjaynagar branch in Bengaluru. A press release said here that the bank will come out with 80 such centres across India in a phased manner. Citizens can make use of these centres for getting their Aadhaar number and making modifications, if any, in Aadhaar records, it added.

Ujjivan Small Finance Bank collects deposits of Rs. 1000 cr in seven months (BL 27.09.17)

The 8% interest rates offered on deposits has enabled Ujjivan Small Finance Bank to collect Rs 1000 Cr in seven months of its operations. Ittira Davis, Chief Operating Officer said that there has been an encouraging response for the interest rate offered on savings with a half per cent higher rates for senior citizens vis-a-vis 6.5-7% in other banks. With this growth momentum, the bank hopes to garner Rs1500-2000 Cr in the first year of operations, he said. The bank, according to him, is offering SB account with no charges for minimum balance and also providing host of other benefits such as doorstep banking, mobile internet, phone banking etc. The hand held device for biometric authentication for instant account opening can also be used for cash deposits, withdrawals and fund transfers at the customers doorstep. Asked whether the bank will review the interest rates, he said it all depends on the market conditions. “We will hold the rates for time being”. Davis said that the bank has established its presence across all four regions in the country in the seven months of its launch and is also looking at offering remittances services to transfer money within Ujjivan and other bank accounts in a very reasonable and affordable manner. With 87 branches, the bank has presence across Kerala, Tamil Nadu, Karnataka, Pondicherry, Gujarat, Maharashtra, New Delhi, West Bengal, Himachl Pradesh, Uttar Pradesh, Punjab and Haryana.

Reducing indents for clerical recruitment in PSBs worrisome, say unions (BL, FE 27.09.17)

There is growing concern that public sector banks are ‘progressively reducing indents’ for recruitment year after year. The headcount number is sought to be reduced even as banks find it difficult to serve customers thanks to an expanding bouquet of services and schemes, according to the unions. This is unacceptable, said C.H. Venkatachalam, General Secretary, All India Bank Employees' Association, in a letter to peer unions in the industry. The reducing indents would result in short supply of clerical staff, even for filling up vacancies arising on account of retirements and promotion, leave alone extra staff required as part of business expansion. Venkatachalam said that there appeared to be a design in the reduced intake of clerical staff, in particular. He requested peer unions to take up this matter seriously with the respective banks. He cited statistics to drive home the point that available manpower in banks has failed increasingly to sync with the increased business volumes during the past three years. At the end of 2013-14, the banks had deposits worth Rs. 65.9 lakh Cr, Rs. 51 lakh Cr in advances and Rs. 116 lakh Cr in total business. The number of workmen in public sector banks was 4.99 lakh. In the next year (2014-15), the deposits had grown to Rs. 71.95 lakh Cr, advances to Rs. 54.76 lakh Cr and total business to Rs. 126 lakh Cr. But the number of workmen had reduced to 4.84 lakh. The number of workmen employed reduced further to 4.79 lakh in 2015-16 even as deposits grew to Rs. 74. 86 lakh Cr, advances to Rs. 55.94 lakh Cr and total business of public sector banks rose to Rs. 130 lakh Cr. This is a worrisome trend, and had to be reversed even if it warranted industrial level strike action, Venkatachalam told fellow unions. According to statistics put out by the Institute of Banking Personnel Selection (IBPS), the reduced level for recruitment is evident in the indents for 2017-18 and proposed for 2018-19.

Empowering postmen to become door-step bankers (BL 27.09.17)

In a bid to empower about three lakh postmen in the country, IndiaPost, which also has the licence to run a payments bank in the country, will be educating and training them to act as banking correspondents. The postmen, with smartphone-cum-biometric reader, printer and card reader, will go door-to-door to educate people about cashless transactions. This move by IndiaPost, a government entity, also resonates with the Modi government’s initiative to make India a less-cash economy. Ashok Pal Singh, CEO of IndiaPost Payments Bank said the government is trying to encourage people to do more and more cash-less transactions in the country and India Post’s initiative to employ postmen will not only help the people in smaller towns transact from the comfort of their homes with a click, but would also help the humble postmen stay relevant in this dynamic world and contribute to the fintech revolution. “We have around three lakh postmen in the country and they will be carrying a micro-ATM sort of device, with the help of which our customers will be able to transact digitally at their door-steps,” Singh said, adding that the IndiaPost Payments Bank will soon be launching a mobile app for the same. With the help of the device, customers will be able to not only deposit their money in their accounts but also pay all kinds of utility bills, book tickets for train and buses, book gas cylinders, pay for services at public hospitals, fees at government schools and buy financial products such as mutual funds, insurance and ETFs, among others. According to experts, the initiative will not only empower people in smaller towns and villages who have to travel long distances to a physical branch but will also result in financial inclusion faster that expected.

Allahabad Bank to introduce 2-tier savings bank interest rate from October 1 (FE 27.09.17)

Close on the heels of some public and private sector banks slashing their interest rates on savings bank accounts, Allahabad Bank is going to introduce 2-tier savings bank interest rate with effect from October 1 this year. For balance less than Rs 40 lakh, interest rate has been set at 3.5% per annum, while for balances of Rs 40 lakh and above, interest rate remains unchanged at 4% per annum. It may be recalled that a host of banks, including SBI and Bank of Baroda, had recently slashed their interest rates on savings bank accounts. For instance, State Bank of India, India’s largest commercial bank, had on July 31 slashed interest rate on savings account deposits by 50 basis points to 3.5% on balance of Rs 1 Cr and below. However, it continues to offer 4% interest on savings account balance of Rs 1 Cr and above. “The decline in the rate of inflation and high real interest rates are the primary considerations for warranting a revision in the rate of interest of savings bank deposits,” it had said. That was followed by Bank of Baroda slashing its interest rate on savings bank accounts by 50 bps to 3.5% on deposits of up to Rs 50 lakh. “We wish to inform you that it has been decided to introduce a 2-tier savings bank interest rate (from) August 5…,” the bank had said in a regulatory filing. It had reduced the interest rate on savings bank balance of up to Rs 50 lakh to 3.5% from the earlier 4%. However, for balance above of Rs 50 lakh, the bank had retained the rate at 4%.

Bank of India defers perpetual bond issue due to high yield demand (FE 27.09.17)

Bank of India (BoI) deferred its plans to issue additional tier-1 bonds or perpetual bonds as yields demanded by investors were higher than expectations, sources aware of the matter confirmed. Additional tier-1 bonds or perpetual bonds do not have a fixed maturity period. For the same reason, yields on these instruments tend to be a bit higher than that of a conventional non-convertible debentures. These bonds qualify as tier-I capital and boost the capital adequacy ratio of banks “The lowest bid received by BoI stood at 11.5%. The bank then decided not to go ahead with its perpetual issue. We believe that the bank might have expected a yield close to 10.5-10.75%,” said a bond dealer. Bond market participants pointed out that the recent bout of volatility in the market has hardened yields. “G-sec yields are rising and the appetite for perpetual bonds seems to be a bit subdued. Banks are also not in a hurry to issue bonds under current market conditions,” said a bond arranger. The benchmark yield rose five basis points on Tuesday to end at 6.67%. Bank of India could not be immediately contacted to confirm the story. This is not the first time that a perpetual bond issue has been deferred. Recently, Oriental Bank of Commerce had cancelled its perpetual bond issue due to higher pricing demand from investors.

NBFCs, new lenders attracting bank talent with fat packages (FE 27.09.17)

At a time when banks are saddled with growing NPAs and managing regulations, non-banking finance companies (NBFCs) and newer, nimbler banks seem to be gnawing at traditional banking talent. Over the last 3-4 years, NBFCs have done better than banks as they had lesser issues of bad loans and profitability and fewer controls enabling them to expand, contribute more to credit growth and tap into growth segments, such as mortgages, home loans and gold loans. “NBFCs are looking to hire similar talent to banks — analytics, control functions and digital skills are becoming important,” says Roopank Chaudhary, associate partner, McLagan Aon Hewitt. Sample these. A year back, a very senior retail banker of a top multinational bank signed up with a much smaller new bank, an erstwhile microfinance institution. Again, over the last two years, about four-five people in senior management have quit a top public sector bank to join a new bank, which on average has more than doubled their pay packages. Or, for that matter, a vice-president of a private bank joining an NBFC at two times his pay a couple of years ago. Annual salary increases for NBFCs have also outstripped that of banking in last two years. Such stories are gathering steam with every passing day as NBFCs and smaller banks carry on expanding in Tier-3 and 4 towns with fewer restrictions. “NBFCs are paying almost three-four times of what people make in banks,” says Joydeep Dutta Roy, head – HRM & capability building, Bank of Baroda. Erstwhile microfinance institutions that have turned into small banks and NBFCs are well penetrated in Tier-3 and 4 towns where there is seemingly a strong demand for capital. Unlike larger banks, reach is not a hindrance for them as they have the franchise. “What they are struggling with is getting the right skill set to be able to scale up, expand and diversify, so they are hiring traditional bankers,” says Chaudhary.

Standard Chartered, Citibank become shareholders in Swift India (FE 27.09.17)

Standard Chartered and Citibank have picked up stake in global financial messaging service Swift’s local arm, becoming the first foreign lenders to invest in the platform. Swift India was formed in 2012 as a joint venture between the global cooperative Swift Scril and nine leading domestic banks. This is its second round of capital raising, an official statement said. Details on the stake picked up by the two lenders or the valuations were not shared. Other lender shareholders in the company include Axis Bank, Bank of Baroda, Bank of India, Canara Bank, HDFC Bank, ICICI Bank, Punjab National Bank, State Bank of India and Union Bank of India. Both Standard Chartered Bank as well as Citi linked the investment to their respective efforts to promote digitisation. “Given our long association with SWIFT across markets, Swift India’s corporate to bank connectivity was a logical extension of our endeavour to help clients automate and digitise flows, whilst gaining efficiency through standardisation and process automation,” Stan Chartered’s head of transaction banking Sanjay Gurjar said. “This association will help enable efficiencies in managing corporate-to-bank digital flows in India on a secure and robust platform,” Citi’s South Asia head for treasury and trade solutions, Debopama Sen, said.

Capital-starved PSBs Line Up QIPs (ET 27.09.17)

Indian Bank, Dena Bank, Union Bank of India (UBI), Syndicate Bank and Bank of India (BoI) are among a clutch of public sector lenders considering a share sale to institutional investors through a qualified institutional placement (QIP) following similar sales by the SBI and Vijaya Bank earlier this year. Chennai-based Indian Bank is leading the race to launch the QIP and has hired four investment banks, IDBI Capital, ICICI Securities, Citibank and B&K Securities to manage the sale. Dena Bank will have IDBI Capital and Motilal Oswal to manage the sale. “Indian Bank is among the best placed among public sector lenders in terms of asset quality and is looking to raise up to 1,500 Cr. Syndicate too has low NPAs. Then there are the large lenders like UBI and BoI, which have gross NPAs in double digits but a good franchise. All of them are contemplating tapping the markets,“ said an investment banker working on at least two of these issues. Indian Bank, with 7.21% gross NPA in the quarter ended June, has the lowest percentage of bad loans to total advances among PSU lenders. Vijaya Bank with 7.31% gross NPAs raised 700 Cr through QIP last month. SBI had raised 15,000 Cr in the biggest such sale in June. Public sector banks need to raise 1.10 lakh Cr from the market as per the government's Indradhanush plan which will kick in from March 2019.

GST collections slowdown in August to Rs 90,669 Cr (BL, BS 27.09.17)

The government collected Rs 90,669 Cr goods and services tax (GST) for August, a little lower than the Rs 94,063 Cr collected in July. This is also lower than the Rs 91,000 Cr which should have come to the Centre and states in a month, given the Budget Estimates and assumed growth rates in receipts for 2017-18.  Only 55% of assessees paid taxes for August, compared to 64% for July. But, the figures should be compared cautiously. About Rs 92,283 Cr GST was collected for July till August 29, while Rs 90,669 Cr was garnered till September 25. Hence, growth in collections was flat in August, compared to July. As much as Rs 94,063 Cr was paid till August 31. About Rs 14,402 Cr came from the Central GST (CGST) in August, against Rs 14,894 Cr in July (paid till August 29); Rs 21,067 from State GST (SGST), against Rs 22,722 Cr in the previous month; and Rs 47,377 Cr from Integrated GST (IGST), compared to Rs 47,469 Cr in July. Of the IGST, Rs 23,180 Cr came from tax on imports, against Rs 20,964 Cr in July, according to figures released by the finance ministry. The cess over the peak rate of 28% garnered Rs 7,823 Cr in August, from Rs 7,198 Cr in July. Of the August amount, Rs 547 Cr came from cess on imports. The cess will be used to pay states that suffer losses because of the GST.  Taking a broad look at the numbers, it is clear that two figures — the IGST on imports and cess collections were higher in August. This means imports in the month were higher than in July, and items that draw cess, such as aerated drinks, cigarettes, cars, and coal, were sold more, at least in value terms.  

ADB lowers India growth forecast for FY18 (BL, BS 27.09.17)

Asian Development Bank has downgraded India's growth projection to 7% for the current fiscal year, while lowering its forecast for the next financial year as well. "India's gross domestic product (GDP) growth is downgraded to 7% in financial year 2017-18, a 0.4 percentage point drop from the April forecast. In financial year 2018-19, the forecast is adjusted down to 7.4%, from 7.6%," ADB said in its Asian Development Outlook 2017 update. However, the multilateral lender said India continues its strong showing although demonetisation and implementation of the new goods and services tax regime have dented consumer spending and business investment. These short-term disruptions are expected to dissipate allowing these initiatives to generate growth dividends over the medium term, it added. The latest report remains sanguine for much of the developing Asia in growth metrics as a result of the broad-based recovery in global trade, robust expansion in major industrial economies and improved prospects of China.

Indirect tax share in GDP at all-time high of 10.5% (BS 27.09.17)

There has been a steady rise in indirect taxes (net of subsidies) in recent years, pushing up retail prices of commonly used goods and services. The combined share of Customs and excise duties, service tax, and value-added tax (VAT) in India’s gross domestic product (GDP) reached an all-time high of 10.5% during the financial year 2016-17, up from 7.7% three year ago. The previous high was 10.1% during the Rajiv Gandhi government in 1987-88. Experts say this could be one of the reasons for a demand slowdown in the economy, as higher indirect taxes raise retail prices, hurting demand as well as production. “Indirect taxes, such Customs, excise, VAT, and service tax, are part of the retail price for goods and services. As such, any increase in taxes raises consumer prices, adversely impacting their demand,” says G Chokkalingam, founder and managing director, Equinomics Research & Advisory.

Scope for RBI rate cut; fiscal stimulus ‘less likely’: ADB (BS, FE 27.09.17)

Asian Development Bank (ADB) expects the RBI to go for another round of rate cut in the latter part of 2017-18 in view of sluggish economic activities but does not see possibility of any major fiscal stimulus. The Monetary Policy Committee of the Reserve Bank reduced the key interest rate (repo) by 25 basis points to 6% in August. The committee is scheduled to come out with next bi-monthly monetary policy decision on October 4. “With inflation within the central bank target range of 2–6% and economic activity weakening in January–June 2017, the latter part of the fiscal year offers some scope for additional monetary easing,” ADB said in a report. In its ‘Asian Development Outlook 2017 Update’, the Manila-based multilateral lending agency had reduced India’s GDP growth forecast for the current fiscal to 7% from 7.4% owing to weakness in private consumption, manufacturing output and business investment.

 

RBI nod for banks to invest in PE, venture debt funds (BL 27.09.17)

The Reserve Bank of India has allowed banks to invest Category II Alternative Investment Funds (AIFs), which includes private equity and venture debt funds. It had earlier allowed banks to invest in the paid-up or unit capital of Category I AIFs, which include venture capital (VC) funds and social venture funds. In a circular issued on Monday, the RBI announced the amendment of its May 2016 order, permitting this investment and maintaining the cap at 10% of the capital of VC, PE and venture debt funds. It has, however, continued with the bar on banks investing in Category III AIFs, which include hedge funds. The latest RBI circular is part of a series of measures being taken by various regulators, including SEBI and IRDA, and the CBDT to ensure uniformity of regulations in the VC and PE industry and making them contemporary. The circular follows a series of discussions the industry has had with the central bank, through the Indian Venture Capital Association. Gopal Srinivasan, CMD, TVS Capital Funds, and Chairman, Indian Venture Capital Association, welcomed the open attitude of and interaction and coordination among various regulators, especially SEBI and RBI, which were also willing to listen to industry voices and make the regulations uniform and contemporary.

Centre to set up regulatory review committee to push industrial growth (BL 27.09.17)

The Centre will soon set up a regulatory review committee to look at issues inhibiting industrial growth and propose ways to get the growth momentum back. Commerce and Industry Minister Suresh Prabhu, in a meeting with top industry associations including CII, FICCI, Assocham and PHD Chamber, also decided to put in place a monitoring mechanism to track domestic and foreign investment proposals in collaboration with States. “We had a useful, productive and forward looking meeting with various industry chambers to find out what we can do together to push growth to a higher trajectory,” Prabhu said after the meeting. The meeting was also attended by Chief Economic Advisor Arvind Subramanian. “The meeting looked at how to get the growth momentum back and boost confidence of industry in India. Once confidence builds up, investments will increase,” said RV Kanoria, Past President, FICCI, who attended the meeting. The regulatory review committee will be headed by Department of Industrial Policy and Promotion Secretary Ramesh Abhishek and also include members from the industry. “The effort will be to look at regulatory issues affecting industry and take steps to increase ease of doing business,” a government official said. The Minister will also hold a separate meeting with the Micro Small and Medium Enterprises (MSME) sector to address their specific problems including access to credit. The industry has also been asked to suggest ways to utilise the excess capacity in the industry which is currently estimated at an average 26%.

Valuation loss in forex reserves amounted to $11.8 bn for FY17 (FE 27.09.17)

The RBI stated in its half yearly report on management of forex exchange reserves that the valuation loss in its foreign exchange reserves, mainly due to the appreciation of the US dollar against other currencies, amounted to $11.8 billion during fiscal year 2017. Compared to this, there was a gain of $0.6 billion in the preceding fiscal, the central bank pointed out. The RBI said that at the end of March 2017, the import cover decreased to 11.3 months from 12 months at end-September 2016. “The ratio of short-term debt to foreign exchange reserves, which was 21.8% at end-September 2016, increased to 23.8% at end-March 2017. The ratio of volatile capital flows (defined to include cumulative portfolio inflows and outstanding short-term debt) to reserves increased from 85.8% at end-September 2016 to 88.1% at end-March 2017,” the report stated. As at end-March 2017, out of the total foreign currency assets of $346.32 billion, $212.9 billion was invested in securities, $107.22 billion was deposited with other central banks, the BIS and the International Monetary Fund (IMF) and remaining $26.2 billion comprised deposits with overseas branches of commercial banks.

 

Model code clamps down on market investments by PSU staff (BL 27.09.17)

The government is compiling a fresh set of norms to govern the conduct of employees of Central public sector enterprises that bars them from political activities and restricts their investments in shares and mutual funds. The draft consolidated model conduct, discipline and appeal (CDA) Rules for CPSEs, compiled by the Department of Public Enterprises, would impact over 12.34 lakh employees working in 327 state-owned firms.  “The original rules were framed in 1974. In the intervening four decades, the government has issued various additions to the code of conduct as and when required. This has now been compiled into a fresh set of norms,” said a senior official. Apart from norms for punctuality, courteous behaviour and prohibiting sexual harassment, the draft model code also bars CPSE employees from holding the office of any political party or organisation and contesting elections to the legislature or local authority. Further, full-time Directors and employees engaged in fixing the price of an initial or follow-on public offer of a CPSE and their family members have been barred from apply in these public offers. Similarly, trading in shares of the CPSE by its employees, who possess unpublished price sensitive information, is also barred. The draft code also prohibits PSU employees from speculating in shares and stock of other companies. Executives would have to report transactions over Rs. 50,000 annually in shares, securities, debentures or mutual funds scheme. For non-executive workers, the limit for such transactions is proposed at Rs. 25,000.

Reliance Capital setting up standalone health insurance firm (BL 27.09.17)

Reliance Capital’s standalone health insurance company is expected to become operational early next year, said Anmol Ambani, Executive Director. “Traditionally, health insurance was part of our general insurance set-up. But to create retail focus we are setting up a standalone health insurance company. We have already received Round 1 approval from the IRDAI (Insurance Regulatory and Development Authority of India),” said Anmol in his maiden speech at Reliance Capital’s 31^st AGM on Tuesday. He alluded to three factors — changing demographics (a younger India with higher income, higher assets, and more financially aware), rising cost of healthcare, and an increase in lifestyle-related ailments, which indicate significant growth potential in retail health insurance. The health insurance company will use technology to connect with customers and distributors to leapfrog competition, he added.

GST, Demonetisation Continue to Haunt Rural Markets: HUL (ET 27.09.17)

Rural markets in the country are yet to recover from the challenges posed by demonetisation, implementation of GST and volatile commodity prices, said fast-moving consumer goods major Hindustan Unilever (HUL). “From double-digit growth in FMCG across urban and rural markets in 2012, the overall segment has fallen to single-digit growth, with rural lagging urban market,“ said HUL MD Sanjiv Mehta, quoting research agency Nielsen. The company, however, showed resilience in performance, reporting 8% and 6% growth in the past two quarters, from no volume growth in the December quarter, he said. “The early part of the second quarter was affected by various myths in trade. But trade situation is improving gradually with the wholesale channel now stabilising,“ he said. The maker of Rin detergent also maintained it had increased its margins to 18%, a 300 basis points rise from 15% in 2010.“Demonetisation was a big challenge to implement, but from a strategic, long-term point of view, it is the right thing to do in India,“ Unilever global CEO Paul Polman said. “In terms of GST, we had been working in a planned way for long for this smooth transition. We have certainly seen that translate into share increases amongst a big part of the business,“ he added.

Banking and Financial News DT. 26.09.2017

State Bank slashes minimum balance to Rs. 3,000, spares minors, pensioners (BL, BS, FE, ET 26.09.17)

State Bank of India has exempted basic savings bank deposit accounts, small accounts, accounts held by minors and pensioners, and those held by recipients of social welfare benefits, among others, from maintaining a Monthly Average Balance. The Monthly Average Balance requirement (MAB) in metro centres has been reduced to Rs. 3,000 from Rs. 5,000 with effect from October 1. “For non-maintenance of MAB, the charges have also been revised downwards, ranging from 20-50% across all population groups and categories,” the bank said in a statement. Currently, the charges at semi-urban and rural centres range from Rs. 20 to Rs. 40 and at urban and metro centres from Rs. 30 to Rs. 50. After amalgamation with its five associate banks and Bharatiya Mahila Bank, SBI had revised the charges on account holders’ minimum balance (non-maintenance), ATM use and cash-handling, among others, with effect from April 1. This did not go down well with customers. In its statement, SBI underscored that financial inclusion accounts, including Jan Dhan Accounts, have never been subject to any charges. The bank said it has 42 Cr savings bank accounts, out of which 13 Cr accounts under the Pradhan Mantri Jan Dhan Yojana / Basic Savings Bank Deposit were already exempted. The revision in MAB is likely to benefit another 5 Cr account holders.

SBI opens new branch in Singapore (BL 26.09.17)

SBI opened its sixth branch in Singapore, extending its services in the country’s heartland. The new branch has come up in Ang Mo Kio area, which is popular for its housing estates. SBI already operates branches in housing estates Marine Parade and the industrial estate of Jurong. It has two branches in Little India precinct as well as one in the central business district. “About 80% of our customers are Chinese and the rest are high networth Indians,” said SBI country-head Soma Sankara Prasad after opening the Ang Mo Kio branch to a roaring lion dance, a Chinese tradition. SBI offers the highest interest rates on deposits among other banks here, handles wealth management, insurance and rupee remittances among a wide range of services, he said. The new branch underlines SBI’s growing banking business in Singapore, he said.

YES Bank set to achieve low-cost deposit target of 40% this fiscal (BL 26.09.17)

Encouraged by healthy growth in deposits and advances in the retail segment, YES Bank has brought forward the target for achieving increase in the proportion of this segment in its overall business. As against the earlier target of achieving 40% CASA (current account, savings account) deposit in overall deposits by 2020, the private sector bank now expects to achieve the same within this financial year. As at June-end 2017, CASA stood at 36.8%. The bank also expects the proportion of CASA plus retail fixed deposits in total deposits to increase to about 75% from the current 62% well before the 2020 target, said Pralay Mondal, Senior Group President, after launching the bank’s private credit card for ultrahigh networth individuals (UHNIs). On the advances front, the bank intends increasing the proportion of retail advances in overall advances to 40% from 32% now. Mondal said the bank is witnessing good traction in retail loans. YES Bank’s ‘by invitation’ credit card for UHNIs has been launched on the MasterCard World Elite platform. This card, which has a membership fee of ₹50,000 and a renewal fee of ₹10,000, will be issued to a select 2,500 customers.

Karnataka Bank to hire consultant for transformation initiative (BL 26.09.17)

The board of Karnataka Bank has accorded in-principle approval for implementing transformation initiatives by engaging a consultant. The bank informed this to the stock exchanges after its board meeting on September 24. In a separate filing to the stock exchanges on September 20, the bank had stated: “As we step into the 94^th year and also as the centenary year (2024) is fast approaching, the bank continues to explore transformation possibilities in all spheres of banking having regard to the changing landscape of the banking sector in the country.” With a view to explore various transformation opportunities, including engaging consultants/advisors, the bank had convened a meeting of the board of directors on September 24. Mahabaleshwara MS, MD and CEO of the bank said that the bank has identified a number of intervention areas for transformation. These include in the areas of growth strategies, HR and digitisation.

KVGB to have Aadhaar-enrolment centres in 10% of branches by Oct 10 (BL 26.09.17)

Karnataka Vikas Grameena Bank (KVGB), which has jurisdiction over nine districts in Karnataka, is targeting to open Aadhaar-enrolment centres in at least 10% of its branches by October 10. Inaugurating the first such centre at its branch in Dharwad on Saturday, S Ravindran, Chairman, KVGB, said it is the first bank to provide this service in northern Karnataka and the first regional rural bank to provide this service in the State. The bank has plans to open such centres in 62 more branches across its service areas by October 10. The bank has 622 branches in Dharwad, Gadag, Haveri, Bagalkot, Vijayapura, Belagavi, Uttara Kannada, Udupi and Dakshina Kannada districts of Karnataka. Customers will have to bring any of the documents approved by the Unique Identification Authority of India (UIDAI) as proof of their residence and identity. “The enrolment process can be completed in about 10-15 minutes,” he said. The Centre has made Aadhaar mandatory for opening new accounts. Existing accounts should be linked to Aadhaar by December 31, he added.

Suryoday Small Finance Bank begins to pare FD rates (BL 26.09.17)

After keeping fixed deposit interest rates relatively high since commencing its operations in January 2017, Suryoday Small Finance Bank has embarked on a path to gradually align them with the rates being offered by mainline banks. Suryoday SFB has cut interest rates on fixed deposits (FDs) in select maturity buckets by 25-75 basis points (bps) with effect from September 21. One basis point equals one-hundredth of a percentage point. The bank has pared the FD rate in its ‘sweet spot’ tenure of one to two years by 50 basis points to 8.50% from 9%, said MD and CEO R Baskar Babu. “We will cut it (interest rate) again after a month by 25 bps. We are getting enough deposits. People are coming and asking why are you paying so much (9% interest rate) when other banks are cutting their FD rates. This is creating discomfort. “So, we are saying, okay if you (customer) are comfortable, we will keep trimming the interest rate by 25 basis points, bring it down probably to 8% and stay there,” explained Babu. Among all the maturity buckets, the bank is paying the highest interest rate of 8.75% in the over two years to three years maturity bucket. It has left the interest rate in this maturity bucket unchanged to attract relatively longer term liabilities. The small finance bank, which is headquartered in Navi Mumbai (the twin city of Mumbai), has kept its savings bank (SB) deposit rate unchanged. The SB rates are 6.25% on deposits up to and including Rs. 1 lakh; 7.25% for above Rs. 1 lakh and including Rs. 10 lakh; and 7% for above Rs. 10 lakh. Suryoday SFB has pegged its SB and FD (in the above one-year maturity bucket) rates higher to attract retail deposits after it got converted from a microfinance institution (MFI) into a bank. Even after the rate cut, the bank is paying about 100-250 bps more on FDs of above one-year tenure compared with what mainline banks are paying. Since March-end 2017, Suryoday SFB has grown its deposits 10-fold to about Rs. 250 Cr as on date. The bank currently has 16 branches.

SBI launches chatbot to help customers in banking activities (BS, FE 26.09.17)

Artificial intelligence banking platform Payjo said it has launched an AI-powered chat assistant for State Bank of India to addresses customer enquiries. The chat assistant, known as SBI Intelligent Assistant, or SIA, will help customers with everyday banking tasks just like a bank representative, the company said in a statement. "SIA is a revolution in the banking industry. It is set to disrupt the way banks and customers interact," Payjo founder and CEO Srinivas Njay said. SIA has been set up to handle nearly 10,000 enquiries per second, or 864 million in a day, which is nearly 25% of the queries processed by Google every day. "SIA will enhance customer service several notches above. Payjo's expertise in the conversational banking domain helped us build SIA as a superior chatbot in the global banking space. "We look forward to taking SIA and simplifying the customer's lives on multiple customer interaction platforms in partnership with Payjo," SBI chief technology officer Shiv Kumar Bhasin said. With SIA, the bank will reduce significant operational expenditure over time. Currently, SIA can address enquiries on banking products and services. It is trained with a large set of knowledge and is adept at answering frequently asked questions as well.

1,000 bank branches open Aadhaar updation centres as Sept 30 deadline nears (BS 26.09.17)

The UIDAI has said over 1,000 bank branches of 42 private and public sector banks have opened Aadhaar enrolment and updation centres within their premises. The Aadhaar issuing body further said it has received commitments for opening of such centres in 15,000 bank branches "at the earliest". "Bank Aadhaar Kendras are being established with a view to make the Aadhaar verification process of bank accounts convenient for the people as it has become mandatory under amended Prevention of Money Laundering Rules to verify bank accounts with Aadhaar by December 31, 2017," Ajay Bhushan Pandey, CEO of UIDAI said in a statement. In July, the Unique Identification Authority of India (UIDAI) had asked private as well as public banks to open Aadhaar enrolment and updation facilities in one out of 10 branches, and the initial deadline for doing so was August- end. Earlier this month, the UIDAI gave banks one more month to open Aadhaar enrolment centres in a stipulated 10% of branches, but said it will impose Rs 20,000 as fine per uncovered branch after September 30. The reprieve was granted as many banks had sought additional time from UIDAI for setting up such facility on their premises. "The enrolment and updation facilities are now being made available within the premises of branches of all scheduled and commercial Banks as...UIDAI has directed them to open these Bank Aadhaar Kendras by September 30, 2017 for the convenience of the people," said the UIDAI statement.

Post-demonetisation digital payments up, debit card use declines: Report (BS 26.09.17)

Investment banking firm Jefferies said there is growth in digital payment mode by bank customers post-demonetisation whereas there has been a decline in usage of debit cards. In a report, Jefferies also said the RuPay adoption for e-commerce has increased while the growth of credit cards has been secular. The National Electronic Funds Transfer (NEFT) volumes have grown upwards of 30% with a further around 10% improvement in per-transaction size, resulting in around 40% growth by value, it said. Similarly, the Immediate Payment Service (IMPS) is showing stellar growth on a smaller base. "While growth has come off the low base, it still continues to grow at 100% plus. Instant payment, with ease of choosing the receiver and its 24x7 availability, makes it a very useful and attractive payment system," Jefferies said. According to the report, the usage of debit card has been weak and the total debit card transactions have seen a modest decline -- both in terms of value and volume. "Card swipes are growing at sub-10% with no change in ticket size resulting in sub-10% growth in transaction value after a sudden spike during demonetisation." "It would, therefore, seem logical that a remonetised banking system has started seeing more cash-based transactions and the debit card is losing out," Jefferies said. On the other hand, the Unified Payment Interface (UPI) has seen a reasonable pick up with the government promoter BHIM mobile app (payment app) continuing to show a healthy growth in volumes. RuPay adoption for e-commerce is fairly encouraging, according to Jefferies. "Total monthly spends have nearly tripled since demonetisation for transactions over POS (point of sale) while e-commerce spends have more than doubled. Considering RuPay cards were mostly provided during the financial inclusion drive, such trends are very encouraging."

Collection efficiency in MFIs, SFBs rises to 93%: Icra (FE 26.09.17)

The collection efficiency in the microfinance sector, which includes microfinance institutions and small finance banks (SFBs), has increased to 93% in July 2017 from a low of 87% in December 2016, credit ratings agency Icra said. The improvement has been seen across the affected districts except the Vidarbha region of Maharashtra, and fresh slippage of loans into delinquency has been arrested, Icra said. Entities with concentrated operations in certain districts of western Uttar Pradesh, parts of Madhya Pradesh, the Vidarbha region of Maharashtra and North Karnataka faced a sharper dip in asset quality following demonetisation, it said. Based on the recovery trends, it is expected that 70-75% of the portfolio delinquent for more than 90 days will be written off. The credit costs for the industry is likely to be in the range of 5.5-8% for FY18, Icra said. The extent of impact will differ among MFIs on the basis of share of their portfolio in impacted geographies, their client engagement, field discipline, collection frequency, IT systems and appraisal mechanisms, and pro-activeness in curtailing operations in overheated areas.

NIBM to train bankers to deal with NPAs, prompt corrective action (FE 26.09.17)

The National Institute of Bank Management plans to conduct workshops on the new ecosystem created by the government for resolving ballooning NPAs. NIBM is also going to conduct programmes to help banks under the prompt corrective action (PCA) of the RBI to come out of the PCA and improve their financials, KL Dhingra, director, NIBM, said. “RBI has put six public sector banks under Prompt Correction Action, which indicates that these banks need to focus on their financials and asset quality. This also puts certain restrictions on these banks. NIBM proposes to conduct specialised courses for the officers of these banks for enabling them to steer their banks out of the PCA, as early as possible,” Dhingra said. The increasing level of NPAs in the banking sector, more particularly of the public sector banks, is a cause of concern for the Centre and it has come up with the Insolvency and Bankruptcy Code 2016 and created the new “ecosystem for resolving the issue of ballooning NPAs”, he said. The ecosystem comprises the Insolvency and Bankruptcy Board of India, National Company Law Tribunal and the National Company Law Appellate Tribunal, and bankers need to be trained to work in the new systems. According to Dhingra, the total number of participants attending NIBM training programmes had gone up by 93% during the last three years.

BBB Gets Ready to Groom Execs for Top Deck (ET 26.09.17)



The Banks Board Bureau (BBB), headed by former Comptroller & Auditor General Vinod Rai, has asked all state-run banks to identify senior-level bank executives, who can be groomed across functions to prepare a pipeline of leaders to take over as managing directors and chief executives in future. The move is a part of the government's efforts to overhaul human resource practices in public sector banks. “We have been asked to identify officers at deputy general manager level, who will be mentored by the BBB. Such identified officers will move across all verticals such as IT, HR and operations within the bank for a period of one year,“ said a government official aware of the developments. A senior bank executive, who is privy to this information, said the BBB was not satisfied with the current level of expertise among the top executives in PSBs. “The shortlisted candidates for the top post or at executive director level did not have enough experience across all verticals. It was felt that banks themselves should identify performing candidates and accordingly they will be mentored by the BBB,“ this official added. Earlier this year, the government shifted Usha Ananthasubramanian, then the MD of Punjab National Bank, to the smaller Kolkata-based Allahabad Bank. Similarly, Melwyn Rego, then the MD of Bank of India, was transferred to Syndicate Bank. A halt on the selection of chiefs for state-run banks is also likely.

Govt’s 1^st estimate sees kharif food output dropping 2.8% to 134.67 mt (BL 26.09.17)

Floods and erratic rainfall in different parts of the country may bring down the 2017 kharif foodgrain output to 134.67 million tonnes (mt) from a record harvest of 138.52 mt during the previous kharif season. Rice output was estimated to fall to 94.48 mt, down 1.9 mt from 96.39 mt in the last kharif season, according to the first advance estimates for the year released by the Agriculture Ministry. The drop in output was seen across all major rain-fed crops barring sugarcane, which registered a nearly 10% increase in cropping area and a corresponding increase in output: 337.7 mt against 306.72 mt in kharif 2016. Experts believe that the first estimates are a poor indicator of the eventual outcome. Abhijit Sen, agricultural economist and former chairman of the Commission for Agricultural Costs and Prices, however, said: “But if it holds, it may have an impact on farm incomes, which will be lower because of lower output. This would mean that the demand for other goods in rural areas will not recover the way the government was hoping it would. In other words, despite having two good monsoon in a row, private consumption expenditure will not go up and thus may have an impact on the overall economy.” However, Agriculture Ministry officials remain hopeful. “The numbers are robust. We are on track. Early estimates are always on the lower side. But considering that there was 5% less rains than the long-period average this time, the overall situation is good,” said a senior official.

Pressure mounts on the rupee (BL 26.09.17)

The rupee, which was stuck in a narrow range between 63.85 and 64.33 over the last several weeks, fell sharply and broke below 64.33 against the dollar last week. The currency fell to 65.16, its lowest since April. Though it managed to claw back from this low to a high of 64.73, the rupee lost momentum again and reversed lower to close at 65.12 on Monday, down 1.5% for the week. A combination of both global and domestic factors triggered this sharp fall in the rupee last week. The outcome of the US Federal Reserve meet on Wednesday was the first trigger that impacted the rupee. The Fed, in the meeting, confirmed its intent to begin its balance sheet normalisation in October. It also raised the growth forecast for this year to 2.4% from 2.2% projected earlier. The dollar index surged as a result of this projection from around 91.5 to 92.7. Though it has come off from this high, it is managing to sustain above 94. Key resistance is at 92.80. A strong break above it can take the index higher to 93.35 initially. Further break above 93.35 will see the rally extending to 94.20. But inability to break above 92.80 can drag the index lower and keep it range-bound between 91 and 92.80. The dollar index will come under renewed pressure if it declines below 91. In such a scenario, it can fall to 90.3. The news that the Centre is planning a stimulus package piled further pressure on the rupee. The fiscal deficit can widen on the back of the stimulus, thereby, weighing on the currency.

Govt. may turn down FRBM panel's proposal on fiscal council (BS 26.09.17)

The government is likely to dump a proposal for setting up a fiscal council, which is aimed at monitoring the government’s fiscal announcements for any given year and providing its forecasts and analysis for the same. Additionally, any new Bill to institutionalise a future fiscal road map, or an amendment to the existing Fiscal Responsibility and Budget Management (FRBM) Bill, may happen in the next Budget session of Parliament, Business Standard has learnt. The fiscal council was suggested by the FRBM panel as part of its recommendations for a medium-term fiscal road map till FY23. The panel was headed by former Member of Parliament and revenue and expenditure secretary N K Singh, and included former finance secretary Sumit Bose, RBI Governor Urjit Patel, Chief Economic Advisor Arvind Subramanian, and Rathin Roy, director of the National Institute of Public Finance and Policy, as members. It has recommended a fiscal deficit target of 2.5% of gross domestic product (GDP), revenue deficit of 0.8% and a combined Centre-state debt ceiling of 60% for 2022-23 — the end point of its six-year medium-term fiscal road map. These recommendations are part of the draft Debt Management and Fiscal Responsibility Bill. The government is examining these recommendations.

 

3,000 State schemes to be brought under DBT ambit (BL 26.09.17)

In a significant expansion of the direct benefit transfer scheme, the Centre is working to expand it to include all State government schemes as well. “All States are on board and working with us. State government schemes should come within the ambit of DBT over the next few months,” said a senior official. An estimated 3,000 schemes of State governments will then come under DBT, covering 40,000 beneficiaries and Rs. 3-lakh Cr of funds. Payments for all government benefits, whether at the State, Central or even local level, would then be done by cash transfers directly deposited into the beneficiaries’ bank accounts. In fact, government officials say that with the inclusion of State schemes, an estimated Rs. 6-lakh Cr of government benefits would be paid through DBT. At present, over 370 schemes of 55 Central ministries are part of the DBT platform, with over 76.38 Cr beneficiaries. Payments of over Rs. 39,623 Cr for Central and Centrally-Sponsored Schemes have been done through cash transfers in the current fiscal, while a cumulative Rs. 2.22-lakh Cr have been transferred through DBT. States have already been working with the Centre to set up DBT cells in their own regions. “With most Central and CSS schemes already on DBT, on-boarding State schemes is the next logical step,” said the official.

RBI caps banks exposure to Reits, InvIts at 10% of unit capital (BS, FE 26.09.17)

The Reserve Bank amended the statutes making it possible for lenders to invest in Reits and InvIts capping such exposures to 10% of the unit capital of such instruments, and also to regulate their commodity derivatives play. In amendments to the Master Direction- Reserve Bank of India (Financial Services provided by banks) Directions, 2016, the central bank said banks should not invest more than 10% of the unit capital of a real estate investment trust (Reit) or an infrastructure investment trust (InvIt) subject to overall ceiling of 20% of its net worth. The master directions first issued in May last year did not provide for investments in the Reits and InvIts, both newly introduced instruments. The RBI also prohibited banks from becoming a professional clearing member of commodity derivatives segment of Sebi-recognised exchanges unless it satisfies certain prudential criteria. These include bank satisfying membership criteria of the exchanges and complying with the regulatory norms laid down by Sebi and the respective stock exchanges and putting in place board-approved risk control measures, among others.

Modi promises to light up all homes by December 2018 with Rs 16000-cr scheme (BS 26.09.17)

Setting the bar for higher government spending in the infrastructure sector, Prime Minister Narendra Modi unveiled a flagship programme called “Saubhagya — Pradhan Mantri Sahaj Bijli Har Ghar Yojana” to provide power to all households in the country by December 2018. The Rs 16,320-Cr scheme aims at providing “last-mile electricity connectivity to all rural and urban households”.  The announcement, made at the headquarters of Oil and Natural Gas Corporation, would reinforce the ruling party’s electricity-for-all target, recently advanced from 2019 to 2018. “Of the 250 million houses that India has, more than 40 million of the houses are electrified. Through Saubhagya, without taking money from the poor, electricity will be provided to these (remaining) families. For this, we expect an expenditure of more than Rs 16,000 Cr,” Modi said.   The Union government will provide 60% of the funds, amounting to Rs 12,320 Cr. For special category states, the Centre’s contribution will be 85%.  State governments and their utilities will provide 10% funds (in the case of special category states, the share will be 5%). Loans will account for the remaining component.

Modi revives Economic Advisory Council with Bibek Debroy as chief (BL, BS 26.09.17)

NITI Aayog member Bibek Debroy will be to Prime Minister Narendra Modi what C Rangarajan was to former prime minister Manmohan Singh.  While the country waited for steps to boost economic growth, the government on Monday announced setting up an Economic Advisory Council to the Prime Minister (EAC-PM), headed by Debroy. Also, even as the BJP’s national executive meeting was silent on any stimulus package, the PM announced a Rs 16,320-Cr electrification plan for all households by end-2018 at another event. The EAC to the PM is making a comeback after over three years, though with a tweak in the name. In its earlier avatar, it was known as the PM’s Economic Advisory Council, or PMEAC. The Modi government decided to set up the panel to propel the economy, as various parameters are showing signs of weakness amid a resource crunch.  The council will analyse any issue, economic or otherwise, referred to it by the PM, according to its terms of reference. The body, which is an independent council, can also take up the issues suo motu.  It will also address issues of macro-economic importance and present its views to the PM.

Centre’s spending slows down after brisk start even as it talks of stimulus (FE 26.09.17)

Even as the Centre is looking for options to prop up demand in the economy, partly by stepping up productive spending, its capital expenditure has slowed down in the April-August period, compared to the scorching pace in the first quarter. Budgetary capex stood at 1.13 lakh Cr or 36.56% of the full-year target of Rs 3.09 lakh Cr in the first five months of 2017-18; in the corresponding period last year, it stood at 36.97% of that year’s target. With early passage of the Budget and front-loading of spending, capex in April-June this year was 22.1% of the Budget target while it was 19.9% of the corresponding target in the year-ago period. Since then, spending has inevitably slowed, given the budgeted fiscal deficit target of 3.2% of the gross domestic product (GDP) for 2017-18. In April-August this year, the fiscal deficit stood at Rs 5.24 lakh Cr, or 95.97% of the full-year target; in the year-ago period, the deficit had barely touched 74% of the annual target. India’s economic growth plunged to a 13-quarter low of 5.7% in April-June as the demonetisation-hit manufacturing sector received another blow from pre-goods and services tax (GST) de-stocking by jittery businesses. The scope for a fiscal stimulus by the Centre is limited. Non-tax revenues not keeping pace with budgetary expectations with shortfalls likely in spectrum proceeds and the Rs 27,000-Cr reduction in the Reserve Bank of India’s (RBI) dividend. Though farm loan waivers could potentially boost rural consumption, these will have an immediate negative impact on states’ capex, as many of their fiscal position is constrained. A stimulus will, thus, have to come by reallocating resources — a shift from revenue to capital spending — as well as PSU capex, which did well last year too.

 

Commercial risk policy set to become simpler, more transparent (BL 26.09.17)

Commercial risk cover will be more broad-based and simpler soon, thanks to the proposed changes in the policy wordings. The General Insurance Council, a representative body of general insurers, health insurers and re-insurers in the country, has recommended changes in the standard fire and special perils insurance policy for commercial risks. The Insurance Development and Regulatory Authority of India (IRDAI) had in February 2016 asked the council to develop industry standard product wordings to be adopted by the insurers for commercial risks. On the basis of a series of discussions held with its member insurers, the council has now come up with recommendations. “Keeping protection of policyholders’ interests in focus, the expert group has recommended certain modifications/ amendments to the extant policy wordings to bring in more clarity in wordings and for removal of ambiguities and to reduce litigation,” R Chandrasekaran, Secretary General, General Insurance Council, said in a communication to stakeholders. For example, it had recommended the complete list of perils covered in standard fire and special perils (material damage) policy. The 12 perils, including fire, lightning, explosion/implosion, aircraft damage, riot, strike, and malicious damage, missile testing operations and bush fire, with their definition and exclusion have been mentioned. The objective is “to bring clarity with respect to the list of named perils covered in the policy,” the council mentioned in the synopsis of the proposed changes.

Chit funds choked by GST levy (BL 26.09.17)

Goods and Services Tax (GST) on chit funds has crushed this traditional financial instrument, its defenders say. The levy of GST has rendered the chit model cost inefficient and neither the subscribers nor the chit promoters can afford the tax burden, said TS Sivaramakrishnan, General Secretary, All India Association of Chit Funds (AIACF). By bringing chit funds under the ambit of GST, it depicts the step-motherly treatment meted out to the industry that has been singled out for taxing while other NBFCs enjoys 90-100% abatement, he said. Sivaramakrishnan further said: “The chit industry has been pleading to increase the abatement from 30% to 90 or 100%, to make it at par with other NBFCs. The implementation of GST has further dented our prospects as we now end up paying more than the service tax levy. “To explain, we were being charged at an effective rate of 10.5% (15% less abatement of 30%) in the service tax regime but in the GST it has been increased to 12%,” he added. The recent trends in the industry have led to concerns about limiting the reach of chit funds to poorer households. According to Sivaramakrishnan, “Chit fund regulations have significantly increased the transaction costs for chits, and since most of the costs have to be incurred for each additional member, the regulations could push funds away from serving the poor. “As funds can only justify the transaction costs per capita if the individual ticket size is relatively large, this possibility cannot be ruled out.” The functionality of the chit funds is akin to that of banks and NBFCs, which mobilise savings from account-holders and lend them to borrowers.

Vikram Akula back into microfinance biz through Vaya Finserv (BS 26.09.17)

Hyderabad-based Vaya Finserv is set to launch microfinance operations, also marking the comeback of Vikram Akula into the sector he’d substantially influenced not long before. Debuting as a banking correspondent (BC) in 2015, Vaya is opening its first set of 15 microfinance branches this week in Bihar, a state where it sees a big need for such loans. Akula is co-founder and chairman of Vaya. The entity currently operates 50 BC branches in five states and managed Rs 436 Cr of a combined micro loan portfolio for YES Bank, RBL Bank and Reliance Capital. It recently got a non-bank finance corporation microfinance licence from the RBI. In 2012, Akula quit as chairman of Bharat Financial Inclusion (formerly SKS Microfinance), which he’d founded and led to a successful initial public offering (IPO) of equity in 2010. It was a result of differences triggered by the Andhra Pradesh microfinance crisis.

Markets fall 2.4% in five sessions (BS 26.09.17)

Concerns of economic slowdown continued to weigh on Indian equities, as the benchmark indices closed in losses for a fifth session in a row on Monday. While the benchmark Sensex lost 295 points or 0.93% to close at 31,626, the National Stock Exchange’s Nifty closed at 9,872, 92 points or 0.92% lower. This takes the total fall in the past five sessions to 2.4%. The current phase of market correction has been triggered by weak cues both on the domestic and global fronts. The Street fears that a possible stimulus plan by the government could disturb the fiscal situation. Further, it could also lead to a significant divergence from the fiscal deficit target for the financial year. In the current scenario, a full-fledged stimulus might not be feasible for the government and, hence, it could lead to increased spending in select pockets. Market experts expect the volatility in the markets to continue for the near to medium term. Numerous analysts have been predicting a timely correction in the markets since August, as the gush of liquidity has led to a sharp rise in valuations. This happened even as corporate earnings remained largely stagnant. The fall was sharper in the broader markets with the BSE SmallCap index losing more than two% during the session, and the BSE MidCap fell 1.14%. The overall breadth of the market also remained negative with shares of 2,020 BSE-listed companies posting declines against 541 posting advances. According to G Chokkalingam, founder and MD, Equinomics Research and Advisory, valuations look expensive in several pockets of the market, especially in the mid- and small-cap stocks. “Industrial growth has stagnated over the years and so have corporate earnings. However, mid and small-cap stocks have rallied even in such a backdrop. Hence, a correction in these segments looks imminent,” he added.